If you’re serving in the military or meet other VA loan eligibility requirements, you might think that choosing between a VA loan and a conventional loan is pretty straightforward. VA loans typically require no down payment and no mortgage insurance, while offering more lenient borrowing qualifications.
However, depending on your financial situation and real estate goals, conventional loans – which aren’t backed by a government agency – may offer different advantages. This could be especially true if you’ve saved for a down payment or you want to buy a second home or investment property.
Let’s explore these two mortgage types in more detail to help you decide which one better fits your needs as a borrower.
Key Takeaways:
- VA loans come with military service eligibility requirements, while conventional loans may have stricter financial qualifications.
- You don’t need a down payment with a VA loan, but you need at least 3% down for a conventional mortgage.
- Conventional loans have fewer requirements for the type of home and its condition.
Conventional Loans Vs. VA Loans: An Overview
VA loans and conventional loans are two options that qualifying borrowers can use to finance a home purchase. Before unpacking the differences between these types of home loans, let’s first get acquainted with their basics.
What Is A Conventional Loan?
Conventional loans are one of the most common financing options for potential home buyers and real estate investors. Unlike government-backed loans, most conventional loans are conforming loans, because they meet the guidelines for purchase by Fannie Mae and Freddie Mac. Private mortgage lenders, such as banks and credit unions, originate these mortgage loans.
Unlike VA loans, conventional loans don’t have any special eligibility requirements in terms of borrower status.
What is a VA Loan?
VA home loans are government-backed mortgages insured by the U.S. Department of Veterans Affairs (VA), meaning the VA assumes some of the risk in the event a borrower defaults on their loan.
To finance a home with a VA loan, you must qualify for your Certificate of Eligibility (COE) as either a veteran, an active-duty military service member or a surviving spouse.
What Are The Differences Between VA And Conventional Loans?
Conventional loans generally have stricter lending requirements than VA loans and other government-backed loans (like FHA loans and USDA loans), because the lenders assume most of the risk.
Let’s take a side-by-side look at the different requirements for VA loans vs. conventional loans.
Property Type
One of the biggest differences between VA and conventional mortgages is the type of property you can finance with each one.
Property Type Requirements
| VA Loan | Conventional Loan |
|---|---|
| Must be a primary residence | Does not need to be a primary residence |
| Multifamily property up to four units allowed if you live there | Second homes, vacation properties, rental homes and other investment properties allowed |
Credit Score
Because your credit score represents how well you’ve managed debt, mortgage lenders rely on this three-digit number to assess your risk as a borrower.
Credit Score Requirements
| VA Loan | Conventional Loan |
|---|---|
| No minimum credit score set by the government | Minimum varies by lender |
| More relaxed lender limits | Most lenders set lower limit at 620 |
| More relaxed lender limits |
Down Payment
One of the most attractive features of VA loans is that they generally don’t require a down payment – although some lenders might require a small down payment if your credit score is low.
Down Payment Requirements
| VA Loan | Conventional Loan |
|---|---|
| No down payment required | 3% minimum down payment |
| 20% down payment waives private mortgage insurance (PMI) |
Mortgage Insurance
Depending on your loan type, down payment amount and other factors, lenders may charge you mortgage insurance to offset the risk of a loan default. Mortgage insurance can be a one-time cost you pay at closing, a regular fee rolled into your monthly mortgage payment, or both.
Mortgage Insurance Requirements
| VA Loan | Conventional Loan |
|---|---|
| Does not charge private mortgage insurance | Private mortgage insurance (PMI) required until you reach 20% home equity |
| Does charge a VA funding fee | PMI costs 0.5% – 6% of loan amount each year |
| Up-front cost is 1.25% – 3.3% of loan amount | Automatically removed at 22% equity |
| Some veterans may be exempt from the funding fee | You can request PMI to be dropped when you reach 20% equity |
Debt-To-Income Ratio (DTI)
Your debt-to-income ratio (DTI) is a percentage representing how much of your monthly gross income goes toward recurring monthly debts like rent, mortgages, student loans, auto loans and credit card payments.
Debt-To-Income Ratio Requirements
| VA Loan | Conventional Loan |
|---|---|
| No maximum DTI set by the government | Maximum DTI could go as high as 50% |
| Limit varies by lender | Higher DTI and higher loan-to-value could increase cost of your private mortgage insurance |
Mortgage Rates
Housing market conditions, inflation and even the federal reserve all factor into current mortgage rates. Your personal mortgage interest rate will also be influenced by your loan amount, down payment and credit score, as well as whether you’re applying for an adjustable-rate mortgage (ARM) or fixed-rate mortgage.
Mortgage Rates* (Based on Data From Rocket Mortgage As Of December 11, 2025)
| VA Loan | Conventional Loan |
|---|---|
| Average rate for a 30-year fixed: 6.384% APR | Average rate for a 30-year fixed: 6.778% APR |
| Average rate for a 15-year fixed: 6.136% APR | Average rate for a 15-year fixed: 6.173% APR |
Loan Limits
The amount you can borrow also varies by loan type. Conventional loans have set maximums, while VA loans have some flexibility. Lenders will still look at eligibility factors like income, debt and credit to determine your personal maximum loan amount.
Loan Limits
| VA Loan | Conventional Loan |
|---|---|
| Technically no loan limits | $806,500 for most areas of the U.S. (as of 2025) |
| VA loan entitlements set maximum loan amount | $1,209,750 for high-cost areas (as of 2025) |
| First-time VA borrowers and those who have fully repaid a VA loan have full entitlement, which guarantees the loan at up to 25% of any amount you’re approved for |
Closing Costs
Closing costs are various fees you pay your lender to process your loan. Included in these costs are origination fees, home appraisal fees, title search fees and more.
Closing Costs
| VA Loan | Conventional Loan |
|---|---|
| Origination fee: up to 1% of loan amount | Origination fee: 0.5% to 1% of loan amount |
| Appraisal fees: $400 – $1,200 | Appraisal fees: $250 to $650 |
| Total closing costs: 3% – 5% of loan amount | Total closing costs: 2% – 6% of loan amount |
What’s Your Goal?
Buy A Home
Discover mortgage options that fit your unique financial needs.
Refinance
Refinance your mortgage to have more money for what matters.
Tap Into Equity
Use your home’s equity and unlock cash to achieve your goals.
Benefits Of A VA Loan Vs. A Conventional Loan
Both VA loans and conventional loans come with their own unique advantages.
Pros Of VA Loans
- No or minimal down payment required
- No mortgage insurance required
- No cap on loan amount for full entitlement borrowers
- More lenient underwriting requirements
Pros Of Conventional Loans
- No funding fees
- No restrictions on property type
- No VA home guidelines to meet
- Available to non-civilians and civilians alike
Despite the short-term benefits of a VA loan, you could potentially end up paying less over time with a conventional loan if you can make a down payment of 20% or higher.
Regardless of your down payment on the VA loan, you’d still end up paying the VA funding fee. With a large down payment on a conventional loan, you’ll avoid PMI altogether. That can give you a much lower mortgage payment. Plus, you’ll save on interest thanks to a lower loan amount.
Ready To Become A Homeowner?
Get matched with a lender that can help you find the right mortgage.
Conventional Vs. VA Loan: Which Is The Better Option?
Neither a VA loan nor a conventional loan is always better than the other. The better option depends on which loan type fits your needs for buying a home.
A VA loan may be a better option when:
- You’d prefer not to make a down payment
- You need to build up your emergency fund or other savings
- You want to avoid paying PMI
- You’re purchasing a primary residence
- You don’t have perfect credit
You may prefer a conventional loan if:
- You can afford a down payment of 20% to avoid PMI
- Your credit score is 620 or higher
- You want lower monthly mortgage payments and can put more money down
- You’re looking to purchase a second home or investment property
Frequently Asked Questions
The Bottom Line: Choosing Between A VA Loan And A Conventional Loan
Choosing among a conventional loan, VA loan or another loan type comes down to your homeownership goals, home buying needs and purchasing power as a borrower.
If you’re an eligible first-time home buyer, the accessibility of VA loans may appeal to you. But if you want lower monthly payments, can afford a down payment of 20% or more or are looking to buy a rental property or vacation home, a conventional loan may be the right choice.
Legal Disclosures*
15-year Fixed-Rate Loan:
An interest rate of 5.75% (6.173% APR) is for the cost of 1.75 point(s) ($6,125.00) paid at closing. On a $350,000 mortgage, you would make monthly payments of $2,906.44. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 80.00%.
30-year Fixed-Rate Loan:
An interest rate of 6.5% (6.778% APR) is for the cost of 1.875 point(s) ($6,562.50) paid at closing. On a $350,000 mortgage, you would make monthly payments of $2,212.24. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 80.00%.
30-year Fixed-Rate VA Loan:
An interest rate of 5.99% (6.384% APR) is for a cost of 1.875 Point(s) ($6,562.50) paid at closing. On a $350,000 mortgage, you would make monthly payments of $2,096.18. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 80.00%.
VA loans do not require PMI. The VA loan is a benefit of military service and only offered to veterans, surviving spouses and active duty military.
15-year Fixed-Rate VA Loan:
An interest rate of 5.49% (6.136% APR) is for a cost of 1.875 Point(s) ($6,562.50) paid at closing. On a $350,000 mortgage, you would make monthly payments of $2,857.94. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 80.00%.
VA loans do not require PMI. The VA loan is a benefit of military service and only offered to veterans, surviving spouses and active duty military.
Ben Shapiro
Ben Shapiro is an award-winning financial analyst with nearly a decade of experience working in corporate finance in big banks, small-to-medium-size businesses, and mortgage finance. His expertise includes strategic application of macroeconomic analysis, financial data analysis, financial forecasting and strategic scenario planning. For the past four years, he has focused on the mortgage industry, applying economics to forecasting and strategic decision-making at Quicken Loans. Ben earned a bachelor’s degree in business with a minor in economics from California State University, Northridge, graduating cum laude and with honors. He also served as an officer in an allied military for five years, responsible for the welfare of 300 soldiers and eight direct reports before age 25.
